ASIC strengthens AI trading safeguards

ASIC is strengthening safeguards for automated and AI-enabled trading.

The regulator will also streamline requirements for securities and futures market participants under incoming changes to its Market Integrity Rules (MIRs).

ASIC said the reforms bolster important gatekeeper controls requiring participants to test, monitor and govern trading systems and algorithms as markets evolve and the adoption of AI increases.

ASIC commissioner Simone Constant said trading on Australia's markets is now almost entirely automated, and the adoption of AI is increasing.

"While these technologies can improve efficiency, trading algorithms can also behave in ways that are opaque, unpredictable and potentially manipulative," Constant said.

"Market participants are important gatekeepers. These reforms strengthen the controls they must have in place to test, monitor and govern trading systems and algorithms, helping protect the integrity and resilience of Australian markets as technology and AI continue to evolve."

The reforms are technology neutral and address risks arising from all trading algorithms, including those enabled by AI and machine learning, ASIC added.

The amendments follow extensive industry consultation and will take effect in 2028. After considering feedback, ASIC extended the transition period to 18 months, giving the industry additional time to implement the reforms.

The changes align Australia's rules more closely with the principles of the International Organization of Securities Commissions (IOSCO) and other international standards.

"By aligning more closely with international standards and simplifying our guidance, we are strengthening protections while reducing unnecessary complexity," Contant added.

"The extended transition period gives industry practical time to implement the changes without compromising their objectives."

Ahead of the new rules commencing, ASIC is also consulting on updated regulatory guidance to assist industry with their transition.

ASIC is proposing to consolidate, simplify and clarify the relevant guidance, making requirements easier for securities and futures participants to interpret and apply.

The proposed changes would reduce the volume of relevant guidance for securities participants by almost 60%, supporting stronger protections through clearer, more proportionate regulation and making it easier to do business in Australia.